The ’079 Patent is directed to a switching regulator that helps conserve power supply and maintain consistent electrical output. On November 4, 2009, Power Integrations sued Fairchild for infringement of the ’079 Patent. Following the trial, the jury awarded Power Integrations damages of $139.8 million. Subsequently, on November 18, 2015, ON entered into an agreement to merge with Fairchild, which closed on September 19, 2016. In the interim, on March 29, 2016, ON filed an IPR petition, challenging six claims of the ’079 Patent. Approximately six months later, and four days after the merger between ON and Fairchild closed, the Board granted ON’s petition and instituted an IPR.
Power Integrations argued repeatedly before the PTAB, and in a separate IPR proceeding relating to a different patent, that ON’s petition should be time-barred because it sued Fairchild more than a year before ON filed its petition and Fairchild was in privity with ON when the merger closed. The PTAB disagreed and held that time-bar determinations should be made at the time an IPR petition is filed, which in this case took place before the merger between ON and Fairchild became final.
On appeal, the parties disputed whether time-bar determinations should be made at the time a petition is filed or at the time an institution decision is made. Power Integrations, in its Patent Owner Response, argued that ON’s IPR petition was time-barred by Section 315(b) due to the merger between ON and Fairchild. Power Integrations further contended that ON was acting as Fairchild’s proxy, and that Fairchild became a real party-in-interest (RPI) prior to institution. As evidence, Power Integrations pointed to a confidentiality agreement between the two parties stating that they shared “a common legal and commercial interest” and were “or may become joint defendants in proceedings.” ON countered that the merger had not closed at the time it filed its IPR petition and Fairchild had no role in filing the IPR—monetarily or otherwise. ON also raised a separate argument that Power Integrations should be precluded from challenging the PTAB’s time-bar decision because it did not challenge the same decision in the other IPR between the parties.
The Federal Circuit rejected ON’s preclusion argument, applying the lack-of-incentive-to-litigate exception to issue preclusion. Although ON established the basic requirements for issue preclusion, the Federal Circuit declined to apply that principle because the first IPR did not involve an infringement finding or damages award. Therefore, Power Integrations had a much greater incentive to litigate the Section 315(b) issue here.
Next, the Federal Circuit reversed the PTAB’s interpretation of Section 315(b) and held that the statute “requires consideration of privity and RPI relationships arising after filing but before institution” (emphasis added). The Federal Circuit determined that the “focus of § 315(b) is on institution” because “the statute specifically precludes institution, not filing . . .” (emphasis in original). By contrast, the “‘is filed’ language [of § 315(b)] merely marks the end of the one-year window that the petitioner has to file a petition for IPR.” The Federal Circuit reinforced this determination by analyzing common law preclusion cases indicating how “[c]ourts have repeatedly found privity where, after a suit begins, a nonparty acquires assets of a defendant infringer.” Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1583 (Fed. Cir. 1986). In addition, the legislative history of Section 315(b) informed the Federal Circuit’s reasoning. Specifically, the court noted that Congress intended the RPI inquiry to require consideration of which parties actually benefit from having patent claims invalidated in an IPR. To that end, the Federal Circuit pointed out that the petitioner is under a continuing obligation to update the Board of any change in RPIs within 21 days, pursuant to 37 C.F.R. § 42.8(a)(3), (b)(1).
Here, Fairchild, a party in privity with ON and an eventual RPI—due to the parties’ merger before institution of the IPR petition—was served with a complaint for infringement more than a year prior to the filing of the IPR petition. As a result, ON’s petition was time-barred.
Practice tip: Petitioners should continuously monitor new, shifting or ongoing party relationships after an IPR petition is filed and consider the potential consequences of those changes on disclosure requirements as well as potential time-bar issues under Section 315(b).
Power Integrations, Inc. v. Semiconductor Components Indus., LLC, No. 2018-1607 (Fed. Cir. June 13, 2019)